Last week’s ugly scenes on the streets of Cairo, where pro-Mubarak supporters fought running battles with demonstrators calling for his removal highlighted the very fragile – and dangerous – situation this strategic Arab country has found itself in.

Although the end of the Mubarak era is fast approaching – the president announced he will not stand for re-election in September, nor will his son be a candidate – there is still a great deal of uncertainty over which way Egypt is heading, the possibility of a power vacuum, ambiguity over which way the army will turn (and how much influence the US will have on the Egyptian military), and plenty of unknown factors about the main opposition movement, the Muslim Brotherhood.

Mubarak’s pledge not to stand again for president later on this year might have gone down well if it was announced a few months ago, but the general reaction among the opposition in Egypt was that this was simply too little too late, and it continued to call for Mubarak’s immediate resignation.

Both the US and the EU have called for an “orderly transition” in Egypt and US President Barack Obama said an orderly political transition in Egypt “must begin now” and lead to free and fair elections.

“An orderly transition must be meaningful, it must be peaceful and it must begin now,” Obama said. “Furthermore, the process must include a broad spectrum of Egyptian voices and opposition parties,” he added.

In a remarkable intervention by the leader of a Muslim country, Turkish Prime Minister Recep Tayyip Erdogan last week advised Mubarak to “listen to the shouts of the people” and “satisfy the people’s desire for change without hesitation”. In other words, Mubarak should step down. The fact that such a statement was made by the leader of Turkey, a secular democratic Muslim country with considerable standing in the Islamic world, is highly significant.

Erdogan is right, of course, and the sooner Mubarak resigns the better. September is too late to wait for a transfer of power and the situation can get completely out of hand by then. Mubarak clinging on to power only risks the possibility of further bloodshed and instability.

However, according to a report in the New York Times, the US is discussing with Egyptian officials a plan for Mubarak to step down and hand power over to a transitional government headed by vice president Omar Suleiman.

The report said the US plan was aimed at getting backing from the Egyptian military, whose support is imperative for any change to take place. It also said that the plan calls for a transitional government to invite members from a broad range of opposition groups, including the banned Muslim Brotherhood, to start a process of reform leading to free and fair elections in September.

Certainly, if the military agrees to this plan – which seems to offer the best hope for on orderly transfer of power in the country and the establishment of a genuine democracy – then Mubarak will have to step down immediately.

It is the army that calls the shots in Egypt. Unlike the police, it is a widely respected institution and it has been restrained in its response to the protests. The army, in fact, has an absolutely crucial role in ensuring the country’s stability and making sure there is no power vacuum in these very delicate times.

Egypt presents a huge foreign policy challenge for the US, probably the greatest one since the overthrow of the Shah in 1979, and also for the EU. Both the US and the EU did not do enough in the past – through diplomatic pressure – to bring about change in Egypt, and now they are facing the consequences.

The US, which actually distanced itself from Egypt’s rulers and supported the protesters before the EU did – Brussels was definitely caught off guard by events and initially struggled to adopt a common position – is obviously nervous about how events will unfold in Egypt because there are so many uncertainties.

What happens in Egypt, the Arab world’s most populous state, will affect the Arab and Muslim world tremendously. If Mubarak had to resign, it would send out a very strong signal to many other Arab autocrats – in a far stronger way than the departure of Ben Ali in Tunisia did – that their time is up. It would no doubt encourage the Arab masses that a new era of “people power” has arrived in the Arab world.

Egypt, the first Arab country to sign a peace treaty with Israel, plays a crucial role in the Middle East peace process and leads a bloc of Arab Sunni nations which is opposed to Iran acquiring nuclear weapons.

What will be the foreign policy of a post-Mubarak Egyptian government? How will it confront Iran? Will it retain diplomatic relations with Israel? If the Muslim Brotherhood does have a role in an eventual new government, how will this affect relations with the Western world? These are some of the questions which no doubt must be keeping US and EU policy-makers awake at night.

What happens in the next few days and weeks will be crucial for Egypt, and hopefully Mubarak will resign soon. Should this happen, America and Europe should do whatever possible to ensure that the transitional period that follows leads to genuine political reform, free and fair elections and hopefully a secular democracy which could serve as a model for the entire Muslim world.

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